DTAA for NRIs: How to Stop Paying Tax Twice on the Same Income

A few years ago, a member in our WhatsApp community posted a message that stopped me in my tracks.

“Mani, I just realized I paid tax on my Indian FD interest in both the US and India. That’s almost 45% gone. Is this even legal?”

It was legal. But it was also completely avoidable.

He didn’t know about DTAA – the Double Taxation Avoidance Agreement. And honestly, most NRIs I’ve spoken to over the years either don’t know it exists or find it too confusing to use.

I get it. Tax stuff is intimidating. Especially when two countries are involved.

But here’s the thing. DTAA can literally save you lakhs every year. And once you understand how it works, claiming the benefit is not that hard.

This guide is everything I wish someone had explained to me when I was working in the US and earning income in India on the side.

I’ve put it together using inputs from our community’s tax consultants, real experiences from NRIs in our groups, and official government sources.

Let’s break it down.

What Exactly is DTAA?

DTAA stands for Double Taxation Avoidance Agreement.

It’s a treaty signed between two countries that says – “We won’t both tax the same person on the same income.”

India has signed DTAAs with over 90 countries. This includes the US, UK, UAE, Canada, Singapore, Australia, Germany, and many more.

Without a DTAA, here’s what would happen. Say you’re an NRI living in the US and you earn rental income from a property in India.

India would tax it because the property is in India. The US would also tax it because you’re a US tax resident and they tax your worldwide income.

You’d end up paying tax twice. In some cases, effective rates could go above 60%.

DTAA prevents that.

It does this by clearly defining which country gets to tax what type of income. And when both countries do tax it, it ensures you get credit for the tax already paid in one country.

One important thing to understand – DTAA does not mean you pay zero tax.

It means you don’t pay tax twice on the same income.

How Does DTAA Actually Work?

There are three main ways DTAA provides relief. Understanding these is key.

1. Exemption Method

The income is taxed only in one country. The other country completely exempts it.

For example, under certain DTAAs, salary earned in a foreign country may be fully exempt in India if you qualify as an NRI.

2. Tax Credit Method

Both countries may tax the income. But the country where you’re a resident gives you credit for the tax you already paid in the other country.

This is the most common method used in the India-US DTAA.

Say you paid 30% tax on your Indian rental income in India. When you file your US tax return, you can claim a Foreign Tax Credit for that amount. So you’re not paying 30% again in the US.

3. Reduced Rate Method (Concessional Rate)

Instead of the full domestic tax rate, the source country taxes the income at a lower rate as specified in the DTAA.

For instance, interest income that would normally be taxed at 30% in India for NRIs may be taxed at just 15% under the India-US DTAA.

This one alone can save you a lot of money.

What Types of Income Does DTAA Cover?

DTAA covers almost every type of cross-border income an NRI might have. Here’s a quick look.

Income Type	What It Means for NRIs
Salary / Employment Income	Taxed in the country where services are performed
Rental Income	Taxed in the country where the property is located
Interest Income (FDs, savings)	Taxed in both countries, but at reduced rates under DTAA
Dividend Income	Taxed in both countries, but DTAA caps the source country rate
Capital Gains (property, stocks)	Rules vary by DTAA – usually taxed where the asset is located
Royalties	Taxed at reduced rates under most DTAAs
Pension Income	Depends on the specific DTAA treaty
Business Profits	Usually taxed only where the business has a Permanent Establishment

If you earn income from property in India, understanding these provisions is especially important.

DTAA Rates – Country by Country Comparison

This is the part most NRIs want to see. What are the actual tax rates under DTAA for the countries where most of you live?

Here’s a comparison of key DTAA rates for income earned in India.

Income Type	India-US	India-UK	India-UAE	India-Canada	India-Singapore
Interest Income	15%	15%	5% (bank) / 12.5% (others)	15%	15%
Dividend Income	15% (10% holding) / 25% (others)	10% (15% for immovable property)	10%	15% (25% others)	10% (15% for immovable property)
Royalties	15%	15%	10%	15% (10% copyright)	10%
Capital Gains	Taxed in country where asset is located	Taxed as per domestic laws of both	Taxed in country of asset	Taxed as per domestic laws	Varies based on asset type

Important: These rates are the maximum rates under the DTAA. If domestic law provides a lower rate, you get the lower one. You always get the benefit of whichever rate is more favorable to you.

For those in the UAE, this is particularly interesting.

The UAE has no personal income tax. So if you’re a UAE-based NRI, DTAA combined with zero local tax is a significant advantage for your Indian investments.

India-US DTAA – What US-Based NRIs Must Know

Since the majority of our community members are US-based, let me go deeper on this one.

The India-US DTAA was signed in 1989 and came into force on December 18, 1990. It was amended through a protocol in 2000.

Key Provisions

Interest Income: Normally taxed at 30% for NRIs in India. Under DTAA, this is capped at 15%. That’s a 50% reduction in your Indian tax on FD interest, savings account interest, etc.

Dividend Income: If you hold at least 10% of voting stock, the maximum rate is 15%. For others, it’s 25%.

Capital Gains: Capital gains from selling property in India are taxed in India. But you can claim credit for this tax when filing your US returns.

If you’re selling property in India, make sure you understand how capital gains tax works for NRIs.

Salary Income: Generally taxed in the country where the work is performed. If you work in the US, your salary is taxed in the US.

The “Saving Clause” – This is Critical

Here’s something many NRIs miss.

The India-US DTAA has a “saving clause” in Article 1(3). This means the US reserves the right to tax its citizens and green card holders as if the treaty didn’t exist.

In plain English – if you’re a US citizen or green card holder, the US will tax your worldwide income regardless of what the DTAA says.

The relief comes from the Foreign Tax Credit. You pay tax in India first, then claim credit for it on your US return. This way, you’re not paying double.

No Social Security Agreement

One thing that frustrates a lot of NRIs in the US – there is no Social Security Totalization Agreement between India and the US.

This means if you’re on an H-1B or L-1 visa, you pay into US Social Security (FICA taxes). But if you return to India before completing 10 years of work credits in the US, you may not be able to claim those benefits.

This is a sore point for many in our community. India and the US have been discussing a totalization agreement, but as of now, nothing has materialized.

If you’re planning your return from the USA, factor this into your financial planning.

India-UK DTAA – Key Points for UK NRIs

The India-UK DTAA has some important provisions.

Interest Income: Capped at 15% in the source country.

Dividend Income: Generally capped at 10%. But if the dividends come from immovable property, the cap is 15%.

Capital Gains: Can be taxed in both countries as per their domestic laws, but credit is available.

Professional Income: If you have a fixed base in one country for performing professional services and are present for more than 90 days, that country can tax your professional income.

Student Provision: Article 21 of the India-UK DTAA provides that students and trainees aren’t taxed on payments received for education or training, up to certain limits, for up to 5 years.

If you’re returning to India from the UK, make sure your tax consultant reviews the specific DTAA articles relevant to your income sources.

India-UAE DTAA – Special Advantage

The India-UAE DTAA is unique because the UAE doesn’t levy personal income tax.

This creates a favorable situation for UAE-based NRIs.

Interest Income: Bank interest is taxed at just 5% in India under DTAA (vs. 30% without it). Other interest income is at 12.5%.

Dividends and Royalties: Both capped at 10%.

Capital Gains: Gains from selling shares of an Indian company can be taxed in India. Property-related gains are taxed where the property is located.

Since the UAE doesn’t tax your income locally, you effectively only pay the reduced DTAA rate in India.

This makes the India-UAE DTAA one of the most beneficial for NRI investors. If you have investments in India while living in the UAE, understanding this treaty can save you significant money.

For those in the UAE, we also have a detailed guide on sending money from UAE to India that covers the financial side of cross-border transactions.

India-Canada DTAA

Interest: Capped at 15%.

Dividends: 15% if the beneficial owner holds at least 10% of shares. 25% in other cases.

Royalties: 10% for copyright royalties. 15% for industrial/commercial royalties.

Capital Gains: Gains from selling immovable property are taxed in the country where the property is located.

Canada taxes worldwide income of its residents. So for NRIs in Canada earning Indian income, the Foreign Tax Credit mechanism is your primary relief.

We have a specific guide for those returning to India from Canada that covers tax planning in more detail.

How to Claim DTAA Benefits – Step by Step

This is where most NRIs get stuck. Let me walk you through the process.

Step 1: Determine Your Tax Residency

Your tax residency status decides which DTAA applies to you.

In India, you’re an NRI if you’ve been outside India for 182 days or more in a financial year. The 182-day rule is the starting point for understanding your residency status.

Your resident country (US, UK, UAE, etc.) will also have its own criteria.

Step 2: Get a Tax Residency Certificate (TRC)

This is the most important document for claiming DTAA benefits.

You need to get a TRC from the tax authority of the country where you’re a tax resident.

Here’s how long it typically takes:

Country	Where to Apply	Typical Processing Time
USA	IRS (Form 8802 to get Form 6166)	45-60 days
UK	HMRC	20-30 days
UAE	Federal Tax Authority	5-10 days
Canada	CRA	30-45 days
Singapore	IRAS	15-20 days

Pro tip from our community: Apply for your TRC at least 3 months before any major income event in India – like an FD maturity or property sale. Don’t wait until tax filing time.

Step 3: File Form 10F

Form 10F is filed on the Indian Income Tax portal. It certifies your residency status and is mandatory for claiming DTAA benefits in India.

You can file it online at incometax.gov.in.

You need a valid PAN card for this. If you don’t have one yet, here’s how to apply for a PAN card as an NRI.

Make sure the details on Form 10F match exactly with your TRC. Even small mismatches can cause rejection.

Step 4: Submit Documents to Your Indian Bank / Deductor

Once you have the TRC and Form 10F filed, submit copies to:

• Your Indian bank (for reduced TDS on interest income)
• The buyer of your property (for reduced TDS on capital gains)
• Any entity paying you dividends or royalties in India

This ensures TDS is deducted at the lower DTAA rate instead of the standard 30%.

Step 5: File Form 67 (For Foreign Tax Credit)

If you’re claiming Foreign Tax Credit in India, you must file Form 67 on the Income Tax portal.

Critical deadline: For AY 2025-26, Form 67 must be filed on or before March 31, 2026. It must be submitted before filing your ITR.

If you miss this deadline, you lose your FTC claim. No exceptions.

You’ll need:

• Certificate from the foreign tax authority confirming tax paid
• Proof of foreign tax payment
• Details of income and corresponding tax in both countries

Step 6: File Your ITR Correctly

When filing your ITR as an NRI, make sure you:

• Report all Indian income in the appropriate schedules
• Fill Schedule FSI (Foreign Source Income) if applicable
• Fill Schedule TR (Tax Relief) to claim the foreign tax credit
• Attach Form 67 acknowledgment

Documents Checklist for Claiming DTAA Benefits

Here’s everything you need, in one place.

Must-Have Documents:

• Tax Residency Certificate (TRC) from your country of residence
• Form 10F filed on Indian Income Tax portal
• PAN Card
• Valid passport
• Proof of NRI status (visa copy, employment letter, etc.)

For Foreign Tax Credit:

• Form 67 filed on Income Tax portal
• Tax payment receipts from foreign country
• Tax return copy from foreign country
• Certificate from foreign tax authority or employer

For Reduced TDS:

• TRC and Form 10F copies for your bank/deductor
• Self-declaration of beneficial ownership
• Bank account details (NRE/NRO)

Understanding the difference between NRE and NRO accounts is crucial here, because the type of account affects how TDS is deducted.

Common Mistakes NRIs Make with DTAA

I’ve seen these mistakes come up again and again in our community calls. Avoid them.

1. Not getting TRC in time

Many NRIs apply for TRC after the tax event has happened. By then, TDS has already been deducted at the higher rate. You can claim a refund later, but it’s a long process.

2. Thinking DTAA means zero tax

DTAA means no double tax. You still pay tax – just not in both countries on the same income.

3. Forgetting Form 67

This is the #1 reason FTC claims get rejected. If you don’t file Form 67 before your ITR, the credit is gone.

4. Not declaring foreign assets

India requires you to disclose foreign assets if you’re a resident or RNOR. Failure to do so can attract penalties under the Black Money Act.

5. Mixing up residency status

Your residential status can change from year to year. Especially in the year you move back to India, you could be RNOR (Resident but Not Ordinarily Resident). This has different tax implications.

Read more about when your resident status changes to NRI and vice versa.

6. Not claiming lower TDS at source

Instead of paying 30% TDS and then claiming a refund, submit your TRC and Form 10F to the deductor upfront. Get TDS deducted at the lower DTAA rate from the start.

7. Ignoring FBAR obligations (US NRIs)

If you’re a US person with Indian bank accounts totaling over $10,000 at any point during the year, you must file FBAR. This isn’t directly part of DTAA, but ignoring it can lead to massive penalties.

Special Considerations When You Move Back to India

This is where it gets tricky. And this is where our community members have the most questions.

The Transition Year

The year you move back to India is complicated.

You might be an NRI for part of the year and a Resident (or RNOR) for the rest. Your tax obligations change based on when exactly you cross the 182-day threshold.

RNOR Status – Your Tax Shield

When you first return to India, you may qualify as RNOR (Resident but Not Ordinarily Resident) for up to 2-3 years.

During RNOR status, your foreign income is generally not taxable in India. This gives you time to restructure your finances.

This is one of the most valuable tax statuses for returning NRIs. Make sure you understand the tax implications when returning to India.

Converting NRE/NRO Accounts

When you become a resident, your NRE and NRO accounts need to be converted to resident accounts. The process and timing matter for tax purposes.

Here’s our guide on converting NRE/NRO accounts.

Your US Retirement Accounts

If you have a 401(k) or IRA in the US, the India-US DTAA has provisions for pension income. But the rules are complex.

Many members in our community recommend keeping US retirement accounts in the US and withdrawing strategically based on your tax residency status each year.

We’ve covered this in detail in our guide on what happens to your 401(k) when returning to India.

How DTAA Interacts with India’s Tax Filing

Let me connect a few dots that often confuse people.

Section 90 of the Income Tax Act – This is the section that gives you the right to claim DTAA benefits. If India has a DTAA with your country, you claim relief under Section 90.

Section 91 – If India does NOT have a DTAA with your country, you can still claim unilateral relief under Section 91. The relief is limited to the lower of the Indian tax rate or the foreign tax rate on the doubly taxed income.

Rule 128 – This governs how Foreign Tax Credit is calculated and claimed. The key rules are:

• FTC is available only in the year the income is offered to tax in India
• The credit cannot exceed the Indian tax payable on that income
• Foreign tax must be converted to INR using SBI’s telegraphic transfer buying rate on the last day of the month before the month in which the tax was paid

For a complete understanding of how to handle your Indian income tax as an NRI, we’ve put together a separate guide.

Real Community Scenarios

Let me share a few situations that come up regularly in our WhatsApp groups.

Scenario 1: NRI in the US with Indian FD Interest

Rajesh has NRE and NRO fixed deposits in India. His NRE FD interest is tax-free in India. But his NRO FD interest (Rs 3 lakhs) normally attracts 30% TDS.

With DTAA, by submitting TRC and Form 10F to his bank, TDS drops to 15%. He saves Rs 45,000.

On his US tax return, he reports this income and claims Foreign Tax Credit for the 15% already paid in India.

Scenario 2: NRI in UAE Selling Property in India

Priya lives in Dubai and sells an apartment in Mumbai. The buyer deducts TDS at 20% on long-term capital gains.

Under India-UAE DTAA, the capital gains are taxable in India (where the property is). Since the UAE has no income tax, Priya pays tax only in India at the applicable rate.

She can apply for a Lower Deduction Certificate from the Indian tax authorities if her actual tax liability is lower than the standard TDS rate.

Scenario 3: Recently Returned NRI with US Investment Income

Amit moved back to India in August 2025. For the financial year, he’s in India for less than 182 days, so he’s still an NRI for tax purposes.

His US salary is not taxable in India. His Indian rental income is taxable in India.

From the next year, he may qualify as RNOR. During RNOR status, his US investment income (interest, dividends) may not be taxable in India – as long as it’s earned and received outside India.

Frequently Asked Questions

Q: Does DTAA mean I don’t have to pay any tax?

No. DTAA ensures you don’t pay tax twice on the same income. You still pay tax in at least one country.

Q: I’m a US citizen living in India. Can I claim DTAA benefits?

Partially. The saving clause means the US will tax your worldwide income regardless. But you can claim Foreign Tax Credit in the US for taxes paid in India. And in India, you can claim DTAA rates for income sourced there.

Q: Do I need to claim DTAA benefits every year?

Yes. You need to submit fresh TRC and Form 10F each year. DTAA benefits don’t carry over automatically.

Q: What if India doesn’t have a DTAA with my country?

You can still claim relief under Section 91 of the Income Tax Act. The relief is limited, but it’s better than nothing.

Q: Can I claim DTAA benefits on NRE account interest?

NRE account interest is already tax-free in India for NRIs. So DTAA isn’t needed for NRE interest. It’s relevant for NRO account interest and other taxable income.

Q: What happens to DTAA benefits if I change my residency status?

The DTAA applicable to you depends on your residency status for that specific financial year. If you move from the US to India and become a resident, the India-US DTAA would apply differently.

Q: Is there a minimum income threshold to claim DTAA benefits?

No minimum threshold. DTAA benefits apply regardless of the amount of income.

Q: I have income from multiple countries. Can I claim DTAA benefits from all of them?

Yes. India has separate DTAAs with different countries. You can claim benefits under each relevant treaty for income from that specific country.

Q: Do I need a CA to file DTAA claims?

It’s not mandatory, but strongly recommended. DTAA provisions are complex, and a qualified CA with international tax experience can help you maximize your benefits and avoid mistakes.

Q: How long does it take to get a TDS refund if excess tax was deducted?

Typically 3-6 months after filing your ITR, but it can take longer. This is why getting TDS deducted at the correct rate upfront (by submitting TRC early) is so much better than claiming refunds later.

Quick Action Steps

If you’re reading this and don’t know where to start, here’s your priority list.

1. Figure out your tax residency status – Which country considers you a tax resident this year?
2. Check if a DTAA exists – Verify India has a DTAA with your country of residence
3. Apply for TRC early – Don’t wait. Apply at least 3 months before any major Indian income event
4. File Form 10F – Do this on the Indian Income Tax portal as soon as you have your TRC
5. Inform your deductors – Share TRC and Form 10F with your Indian bank, tenant, or buyer
6. File Form 67 before your ITR – If claiming Foreign Tax Credit, this is non-negotiable
7. Consult a tax professional – Get a CA who understands double taxation for NRIs and can review your specific situation
8. Keep records – Maintain copies of all TRCs, tax receipts, and filing confirmations for at least 7 years

Wrapping Up

DTAA is one of the most powerful tools available to NRIs for reducing their tax burden. But it only works if you know about it and take the right steps at the right time.

The biggest takeaway? Be proactive, not reactive.

Don’t wait until tax season to figure out DTAA. Apply for your TRC early. File Form 10F as soon as possible. And always, always file Form 67 before your ITR if you’re claiming Foreign Tax Credit.

I’ve seen too many NRIs in our community lose money simply because they didn’t know these benefits existed. I hope this guide changes that for you.

Disclaimer: This article is for informational purposes only and should not be considered tax advice. Tax laws change frequently, and individual circumstances vary. Please consult a qualified tax professional or Chartered Accountant for advice specific to your situation. Always verify information with official sources like the Income Tax Department, IRS, or relevant tax authority in your country of residence.

Sources: Income Tax Department of India, Indian Embassy Washington DC, ClearTax, PwC Tax Summaries, India Briefing. DTAA rates and provisions are subject to periodic amendments.

---

If you’re planning your move back, join our WhatsApp community at https://backtoindia.com/groups – 20,000+ NRIs helping each other with real, lived experience. It’s free and volunteer-run.